ASIA-PACIFIC: INVESTMENTS IN RENEWABLE ENERGY – THE TIME IS NOW ASIA-PACIFIC: INVESTMENTS IN RENEWABLE ENERGY – THE TIME IS NOW Preface The Asia-Pacific region is expected to attract approximately 40% of the total global investment in Renewable Energy capacity between now and 2050. The region – especially South East Asia – benefits from a unique combination of electricity demand growth, electricity supply crunch and abundant solar, wind and water resources to spur investments in Renewable Energy assets. Long being a laggard in Alexander Lenz terms of market development compared to other regions and to its Chief Executive Officer APAC theoretical potential, regional governments are expected to pave [email protected] the way that will help to reduce currently prevailing regulatory and policy hurdles as the electricity generated from renewable genera- Alexander has worked in the renewable energy sector since 2007. tion sources becomes more and more price-competitive. In this still Prior to joining Aquila Group in 2020, Alexander was the CEO of rather immature market environment, it is challenging for investors Conergy, based in Singapore. Previously, when Conergy was part to originate, develop and operate renewable energy assets directly of a global group, Alexander was the CEO & President APAC, respon- – Aquila Capital has built a team with a longstanding experience in sible for the group’s business in Asia Pacific and the Middle East. investing, developing, building and operating Renewable Energy Before moving to Asia, Alexander was Head of Corporate Develop- assets throughout the region, both in developing as well as devel- ment in Conergy’s headquarters in Hamburg, Germany. Alexander oped markets. With this team and building on two decades of real was previously a consultant in the Restructuring and Corporate asset investment experience, Aquila Capital is well set to serve inves- Finance practice of Roland Berger Strategy Consultants in Berlin, tors in the challenging but exciting market environment in Asia-Pacific. Germany and a consultant in the management consulting practice The time to invest in Renewable Energy in Asia-Pacific is now! of Deloitte in Duesseldorf, Germany. He holds a master’s degree in Economics from Maastricht University, The Netherlands. Author: Peter Schnellhammer Investment Writer [email protected] Peter is Investment Writer at Aquila Capital. He has more than 4 years experience in Strategic Research and Alternative Investments. Prior to joining Aquila Group in 2019, he focused on macroeconomic research of Real Estate markets. Peter Schnellhammer holds a M.Sc. in Economics from University Rostock. © 2021 AQUILA CAPITAL – FOR PROFESSIONAL INVESTORS ONLY 2 ASIA-PACIFIC: INVESTMENTS IN RENEWABLE ENERGY – THE TIME IS NOW Please find in this Paper, On-site Market Knowledge from: Hendrik Bohne Christian Krebs Head Business Development & Head Investment and Asset Management APAC Development APAC [email protected] [email protected] Hendrik started working in the renewable energy space in 2007 in Christian has over 20 years of international lending, structuring and the Indian hydro power sector, before moving into solar PV for the advisory experience. He came to Asia in 2014 to head the APAC main part of his career. Prior to joining Aquila Group in early 2020, energy origination and structuring business for Norddeutsche Hendrik was responsible for the C&I business of Blueleaf Energy, Landesbank (NordLB) where his team advised and financed ca. 1.6 based in Singapore. A core activity in this role was the PPA origina- GW of renewable energy in the region until his departure in early tion and execution with corporate offtakers. Previously, as part of 2019. He subsequently joined the Australian renewables and energy global group Conergy, Hendrik was responsible for the EPC business transition advisory and accelerator firm Energy Estate before coming unit in APAC and Middle East. During his tenure Conergy was able back to Singapore mid 2020 to lead Aquila Capital’s APAC development, to gain significant market shares in APAC with projects across Aus- origination and structuring activities. tralia, South East Asia and Japan. He holds a master’s degree in Economics & Engineering from Furtwangen University, Germany and Before moving to Asia Christian held several senior positions in a Bachelor of Engineering in Product Design from Hanzehogeschool NordLB’s international renewable energy, industry and infrastructure Groningen, The Netherlands. lending business based out of Hannover/Germany and London/UK. He also led a liquidity team within treasury department and managed the bank’s derivative team for Shipping and Aircraft. Christian holds a degree in economics, is married with three children and speaks English, German and Russian. © 2021 AQUILA CAPITAL – FOR PROFESSIONAL INVESTORS ONLY 3 ASIA-PACIFIC: INVESTMENTS IN RENEWABLE ENERGY – THE TIME IS NOW Management Summary 1. Asia-Pacific Driving the global economy ............. S. 5 n The Asia-Pacific region accounts for more than half of the 2. Focus on technology............................ S. 9 world‘s projected economic growth. 3. Southeast Asia energy market ................... S. 15 n Industrialisation and the emerging middle class in Southeast 4. Energy market: Developed countries in APAC ........ S. 21 Asia are leading to the most dynamic growth in energy 5. Outlook .................................... S. 24 demand worldwide. 5.1 Investment Forecast ASEAN .................. S. 25 n The transformation of energy systems in the developed 5.2 Investment Forecast Developed Countries (APAC).. S. 27 countries of East-Asia and Australia is still in its initial stages in 6. Return expectations of renewable energy global comparison. investments in APAC ........................... S. 30 n However, renewable technologies have in most Asian countries 7. Conclusion .................................. S. 32 already reached grid parity with new fossil fuel power plants. n The strength of coal is fading, import restrictions, and interest groups are the only reason why coal is in terms of average prices still competitive. However, these cannot be maintained in the medium term for a variety of reasons. n Fossil sources are increasingly facing headwinds due to problems of financing and import dependency. n Major areas of APAC are showing high potential in solar radiation, due to their location in tropical areas and the sunbelt. n The adoption of climate targets as well as public engagement are driving state incentive mechanisms for the expansion of renewable energies. n Supportive regulatory measures, constantly improve the market environment. n Strong growth in demand for renewable energies by companies is leading to a significant increase in the importance of the market for private electricity purchase agreements. n The economic stimulus provided by the expansion of renewable energies offers a sustainable way out of the recent global crisis triggered by the pandemic. n Irrespective of external costs, the purely economic superiority of renewable energies will continue to give a boost. n Knowledge transfer is accelerating the progress of financial and technical framework conditions. n The anticipated significant growth of renewable energies in the region offers attractive risk-return-profiles. © 2021 AQUILA CAPITAL – FOR PROFESSIONAL INVESTORS ONLY 4 ASIA-PACIFIC: INVESTMENTS IN RENEWABLE ENERGY – THE TIME IS NOW 1. Asia-Pacific Driving the global economy Asia-Pacific is one of the most diverse regions on earth. It is charac- Economic development terised by a multitude of languages, religions, forms of government, While the world economy in the 20th century was largely shaped by and energy systems. It includes countries at all stages of develop- the influence of Europe and North America, the centre of gravity of ment, from the highly developed Australia and high-tech countries the world economy is increasingly shifting towards the south-east. such as Japan, Taiwan, and South Korea, to the emerging markets The wave of globalisation led to the dynamisation of the world of India and China, and the developing countries of ASEAN1. economy and particularly promoted industrialisation in East and South-East Asia. The region is characterised by its economic dynamism. A contribu- tion to global economic growth of more than 50% results in the Figure 1: Economic center of gravity2 most dynamic energy demand worldwide. The non-OECD countries of Asia account for two-thirds of the 70% increase in global energy demand by 2050. 1990 While the region still has relatively low capacities in the field of 1980 2000 1970 renewable energies today, opposing developments are constantly 1960 changing the market positions. Headwinds for fossil energy sources 1950 are growing while continuing efficiency gains are making renewable 1940 2010 energies increasingly competitive. Regardless of the external costs 1913 arising from emissions, economic superiority has already been achieved several times in relation to new construction. 2025 The provision of the region with natural resources, with a still low share of renewable energies and an unprecedented growth in energy 1820 demand, is creating a huge growth market. 1500 AD 1 1000 Even small changes can restructure the market conditions and offer corresponding opportunities. In order to take advantage of oppor- tunities that arise and to control and identify risks, a local presence Figure 1 illustrates